Back to School Bonus

Families with students heading off to college this fall take note: The interest rates on all newly-issued federal loans have been reduced for the coming academic year -- but those reductions are much more pronounced for student borrowers than for their parents.1

For instance, the interest rate on Stafford subsidized and unsubsidized loans for undergraduates will decline to 3.76% from 4.29% last year.1 For graduate students, the Stafford loan rate will fall from 5.84% to 5.31% for the coming academic year.1 In contrast, the rate on Federal PLUS loans for parents is a full percentage point higher at 6.31%.1

That rate is down from 6.84% for PLUS loans issued for the 2015-2016 academic year, but it still will nearly double the cumulative interest paid on a $50,000 loan over 20 years when compared with an undergraduate Stafford loan.1 (Note that rates are set each year for new loans, but those rates remain fixed for the life of the loan.)

On the surface, one doesn't need a college degree to see the benefit of having the student in your family take out education loans in his or her name. But looking past the numbers, there are other variables at play that must be taken into consideration. While young adults have ample time to pay off their loans, many are facing a considerable student loan debt burden that has been estimated at more than $1 trillion nationally. Per graduate, that total breaks down to an average of $29,000 in student loan debt.2

Lives Interrupted

This debt load has made it harder for young adults to get on with their post-college lives. For instance, one study found that 27% of those polled who had taken out student loans were finding it difficult to afford daily necessities; 63% said that debt had impacted their ability to make larger purchases, such as a car; three out of four said college debt had affected their decision or ability to buy a home; and 43% said it had caused them to delay starting a family.3

For their part, parents need to assess whether and to what degree they are willing and able to help share the responsibility for paying off their child's college costs at a time when they may also be trying to save aggressively for their own retirement.

Repayment Plan Choices

Fortunately for those concerned about strategies for repaying federal student loans, there are many options -- and an abundance of information about them. As a starting point, visit the Federal Student Aid website for a detailed summary of the many repayment resources available to you. For an at-a-glance summary of the interest rates, loan limits, and other terms for federal student loans issued from July 1, 2016 through June 30, 2017 click here.



1.  Squared Away Blog, "Parents, Start Student Loan Homework!," July 5, 2016.

2.  The New York Times, "Rates on Student Loans Are Falling," June 24, 2016.

3.  American Student Assistance®, "Life Delayed: The Impact of Student Debt on the Daily Lives of Young Americans," October 3, 2013.


Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail


The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.